Ethereum financial statement - they should have gone NBT

desrever 2015-09-30 06:57:09 UTC #1

Here is a new post from Vitalik where he is basically opening up some data about the ethereum foundation and trying to reassure shareholders .

However he is admitting the foundation planned hires and other activities naively thinking BTC price would stay at 500$ forever (or maybe thinking it’d go up?) … So now they are facing a complete cash burnout faster than planned.

First of all, it is indeed true that the foundation’s finances are limited, and a large part of this was the result of our failure to sell nearly as much of our BTC holdings as we were planning to before the price dropped to $220; as a result, we suffered roughly $9m in lost potential capital , and a hiring schedule that was meant to last over three years ended up lasting a little under two

[…]

Assuming that we get there in three months and that ether and bitcoin prices stay the same (heh), we have enough to last until roughly Jun 2016 at the 340,000 rate, and perhaps up to Sep-Dec 2016 given planned transitions;

This sort of thing shouldn’t happen, and that’s how I think NuBits should be used. It could have prevented a multi-million $ disaster that is threatening to bankrupt one of crypto’s most interesting space.

EDIT: This links should also go in here imho -> Spot an Opportunity to Promote Nu? Post a Link in Here!

zoro 2015-09-30 06:59:16 UTC #2

one of the many nubit’s use cases

mhps 2015-09-30 07:25:35 UTC #3

Ahem. For Nu, which is going without effective hedging against exchange rate risk, it has prevented Nu liquidity providers from having a multi-million $ disaster.

masterOfDisaster 2015-09-30 07:52:24 UTC #4

Only if they had kept the BTC and wouldn’t have traded them to fiat and cashed it out

desrever 2015-09-30 07:54:30 UTC #5

Oh well, for sure for an operation of that scale a different hedging mechanism should have been in place to handle BTC proceeds from NBT sales.

masterOfDisaster 2015-09-30 08:01:08 UTC #6

As I think a moment about it - Nu now has that hedging mechanism.

The proceeds from NBT would be distributed to the NSR holders!
The millions wouldn’t stay in tier 1, 2 or 3…
I imagine lots of NSR holders would cash fiat out for the PPC they would receive or diversify in something else…
BTC volatility wouldn’t be that much of an issue in this case.

…in the time Ethereum was funded NSR grants were not in place. That kind of hedging wouldn’t have worked well. Only now Nu is (almost) in the position to handle even million Dollar deals. Seeded auctions are another missing piece…

I thought some more moments about it. These high amounts can’t be handled with dividend distributions alone.
The money must stay in the Nu network (at least big parts of it) and not just loosely tied to Nu, because the pockets of NSR holders might be more far than Nu can reach in case Nu needs money to buy back the millions of NBT.

If Nu were to buy millions of Dollars from the market, it would do so with NSR grants.
NSR holders could buy NSR with the distributed PPC to provide Nu with money to buy back the NBT.
But there are conditions under which it would be wiser to just keep the money, let the peg break and let Nu go bankrupt.

NSR buybacks are the only way I can think of to really solve that issue.

zoro 2015-09-30 08:03:34 UTC #7

guys, we are not here for the small fish. we are here to provide a pegged crypto no matter what!
i remember a guy that wanted to buy a large amount of NBT from cryptsy (75.000 every month)
and i was ashamed we couldn’t support that!
we have to grow, enormously. i prefer the very long term profit (success of DAO) even if it takes years,
than the quick and temporary profit based on BTC’s volatility!

desrever 2015-09-30 08:30:11 UTC #8

I also want to point out that shareholders and LPs wouldn’t have suffered any loss at all if NBT came from a grant.

We [the peg] would have faced problems only if ETH wanted to redeem all coins at once and we ONLY had the proceeds to bake the peg. Which is unlikely, given that they had a three-five year plan. With those level of funding we’d attracted way more LPs to gradually absorbe it and distribute risks.

mhps 2015-09-30 09:52:29 UTC #9

That is a good point. Suppose ETH bought NBT (when the BTC was worth 500 NBT!) Nu would use the proceed to increase the value of NSR (buy back, dividends…). However as BTC depreciated (i.e. people sell BTC for fiat and don’t come back) NSR would have probably followed, too. That is where the problem is – storing the wealth in NSR cannot escape the fate of devaluation with BTC, to a large extend.

Didn’t we go that route and decided to put an end to it due to counter party risk?

cryptog 2015-09-30 10:26:00 UTC #10

So what should we do in order to be able to support Ethereum if it had to cash out millions of NuBits?
Just provide the necessary buy side liquidity